Moving the Numbers around: Debt Consolidation
Contributed by Boo Roberts
What is Debt Consolidation?
Debt consolidation is when you move all of your debt to one place. Say you have thousands of dollars in credit card debt on many different credit cards; when you get a debt consolidation loan, all of that gets paid off and you end up making one payment a month, instead of, say, fourteen. Of course, the trick is not using those credit cards again, or you will have more debt plus your original debt that you put into your debt consolidation loan. Debt consolidation can work other ways too, instead of taking out a loan you can move all of your debt to one credit card.
When should you use Debt Consolidation?
Debt consolidation is a good idea, especially if you are paying high interest rates on multiple credit cards. You might have one lower interest rate credit card that offers you the option of debt consolidation. This means that the credit card company will send you checks to pay off other debt, thus transferring that debt from your old high interest card to a lower interest card. Of course, you still have that debt: debt consolidation does not erase debt, debt consolidation just moves the money you owe around.
